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Staff explains how TIF captures incremental taxes and what the city could fund with retained increment
Summary
Staff told the council that TIF captures incremental taxes (with most school district levy carved out) and that retained TIF increment could fund stormwater and street projects, relieving some burden from property owners.
City staff explained the mechanics of tax increment financing and how the city might use retained increment to fund local capital projects. Laura Smith said that when TIF captures incremental new taxes the city can allocate a portion to developer reimbursements and the remainder can be used for TIF-eligible public infrastructure within the district.
She noted that some portions of the school district levy are carved out and not fully captured as TIF, but that most other mill-rate components can produce incremental revenue that the city may use for projects such as stormwater improvements linked to the Rock Creek Channel project. "There are some carve outs for a portion of the school district levy, but almost all of the rest of the taxes get captured as tax increment," Smith said, explaining the trade-off between general tax receipts and TIF-eligible uses.
Staff emphasized the council's discretion in choosing which line items to reimburse under a project plan and noted that some standard redevelopment-agreement provisions allow up to a 125% increase on particular line items; applying those provisions can sometimes reduce the effective TIF cap depending on how overruns are categorized.
